Weekly Policy Update: State Releases Updated Economic and Revenue Forecast
By: Colorado BioScience Association Date: 09/18/2020
This morning, the Joint Budget Committee (JBC) heard presentations on the September economic and revenue forecast from Legislative Council Staff and the Office of State Planning and Budgeting (OSPB).
On the positive side, the economic recovery over the past 3 months has outpaced expectations, but the damage was extensive, and the pace of recovery is slowing. Both Legislative Council and OSPB stressed the uncertainty of their forecasts, citing unknown factors about the containment and treatment of COVID-19, the impacts of coming off of federal stimulus dollars, the influence of the recession on 2020 incomes taxes, and the full extent of the economic damage.
Legislative Council reported that 2019 sales and income tax collections were stronger than expected, which means the General Assembly may have more money to spend this year than they thought. For the current fiscal year (2020-21), the new forecast shows that the JBC will have close to $1.7 billion to spend over and above the 2020-21 appropriations. Legislative Council also predicts that the General Assembly will have $2.9 billion more to spend or save in fiscal year 2021-22 than what was available to spend or save in fiscal year 2020-21, but this does not take into account caseload growth or inflation.
While the forecasts are improving, the crisis is still severe, and we are nowhere near pre-pandemic forecast levels. We are likely to lag behind those levels for years. OSPB Director Lauren Larson told the JBC she predicts a $1.6 billion shortfall in the 2021-22 fiscal year, and that will grow to a $2.2 billion shortfall in 2022-23.
Several ballot measures are also contributing to uncertainty about the budget. Amendment B would repeal the Gallagher Amendment, which requires that 45% of the total share of state property taxes come from residential property taxes and 55% of the total share of state property taxes come from commercial property taxes. Another measure, Proposition 116, would lower the state’s income tax rate from 4.63% to 4.5%.
Given the long list of unknowns impacting the state budget and economic recovery, state economists emphasized that the JBC will have to wait until March 2021 for solid numbers to write the budget.
You can view the forecast documents here:
The Joint Budget Committee will hear another quarterly forecast in December. We will continue to keep our community posted and share updates about the implications for our members.
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